PHOENIX ­ Pinnacle West Capital Corporation (NYSE:PNW) plans to develop a natural gas-fired electric generating station of up to 2,120 megawatts approximately 50 miles west of Phoenix near the Palo Verde Nuclear Generating Station switchyard, Generation President Bill Stewart announced today.

The plant will compete in deregulated energy markets of Arizona, California and other western states and will be operated by Pinnacle West Energy, the new Pinnacle West generating entity that was formed earlier this week.

"We intend to be a vigorous player in these competitive generation markets," Stewart said. "We have a strong record of low-cost, efficient plant operation. We can best serve the public and our shareholders by pursuing these developing markets, particularly in Arizona and the Southwest." 

The state-of-the-art, four-unit combined cycle plant will be built in phases, coming on line in 530-megawatt increments beginning in 2003, with the final unit anticipated to be operational in 2007. Land has been acquired and environmental permit applications are being prepared and submitted for the project. Construction contracts will be on a fixed-price basis and total approximately $1 billion. Work on the first unit is expected to begin in late 2000.

As part of the project, Pinnacle West has begun seeking the input of residents from nearby neighborhoods and communities who will be asked to provide advice during planning, construction and operation of the new facility.

The plant's location was selected because the Palo Verde switchyard is a major transmission hub and provides access to energy markets in Arizona, California and across the Southwest, a region that has seen significant growth. Since 1994, electricity usage in Arizona has increased more than 4.5 percent a year.

In a separate project announced in April, Pinnacle West and Calpine Corp. of San Jose, Calif., will build a 530-megawatt natural gas-fired combined cycle unit at the existing West Phoenix Power Station. Pinnacle West also will build a 130-megawatt combined cycle unit at West Phoenix. Environmental permit applications are being prepared and submitted, and construction of the smaller unit is to begin early next year.

Natural gas-fired, combined cycle technology is widely regarded as clean burning because it first uses hot combustion gases to power one turbine and then uses the same gases a second time to produce steam that can power a second turbine, essentially using the same heat energy twice. Combined cycle technology produces the lowest emissions of any fossil fuel.

Long term, the Pinnacle West projects will provide electricity to sustain a strong economy, Stewart said. In addition, they will make available low-cost power for consumers during periods of high demand, such as during hot summer months, as well as stabilize the southwestern power grid to prevent imbalances that can cause power interruptions.

Pinnacle West, through its subsidiary APS, manages approximately 8,000 megawatts of generating capacity.

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This press release contains forward-looking statements that involve risks and uncertainties, which include, but are not limited to, the ongoing restructuring of the electric industry; the outcome of the regulatory proceedings relating to the restructuring; regional economic and market conditions, which could affect customer growth and the cost of power supplies; the cost of debt and equity capital; weather variations affecting customer usage; and the strength of the real estate market. These factors and the other matters discussed above may cause future results to differ materially from historical results, or from results or outcomes currently expected or sought by the Company.